One More Sign for a Turn to Growth in Europe

A Peiner Träger steel plant in Peine, Germany. The German economy is leading Europe, with manufacturing at a 25-month high.

Sebastian Kahnert / European Pressphoto Agency

By DAVID JOLLY

August 22, 2013

PARIS — Economic activity in the euro zone this month reached its highest level in more than two years as manufacturing grew, new survey data indicated on Thursday, providing another glimmer that a slow expansion might finally be under way.

A survey of corporate purchasing managers by Markit Economics, a data and analysis firm in London, pointed to a broad — if tentative — recovery in the zone, the 17 European Union countries that use the euro.

Markit’s composite output index — which tracks sales, employment, inventory and prices — rose to 51.7 in August from 50.5 in July. The latest figure was the highest in 26 months. A number over 50 indicates growth.

Although not all the news was good — the survey indicated a contraction in French output during the month — the results were the second recent set of promising signals. Last week, official data showed that Europe broke out of recession in the second quarter of the year, helped by a rebound in household spending in Germany and France.

The data “provide further evidence that the currency union continued to expand in the third quarter, albeit at a pretty modest pace,” Jonathan Loynes, an economist in London with Capital Economics, wrote in a research note. “On past form, the index is now consistent with quarterly growth in euro zone G.D.P. of about 0.2 percent,” equivalent to an annualized gross domestic product rate of about 0.8 percent, he wrote.

The world economy could use a European economic renaissance, as investors have been unnerved by signs of a slowdown in emerging markets and anxiety about the timing and impact of the Federal Reserve’s monetary stimulus policies.

Still, there is little sign that the tepid recovery will be enough to address the main problems weighing on the euro zone: an unemployment rate at record highs and a crisis of confidence in public sector finances.

Germany, with the largest European economy, led the way again, with output expanding at its fastest pace since January and with manufacturing at a 25-month high, according to Markit data.

Carsten Brzeski, an economist in Brussels with ING Bank, said Germany was benefiting from strong domestic demand and improvements across the European economy. “It looks as if new growth hopes for the rest of the euro zone are stimulating German confidence,” he wrote in a note to clients, “which in turn could lead to higher German economic growth and could eventually become growth-supportive for the euro zone.”

Karl-Heinz Streibich, the chief executive of Software AG, based in Darmstadt, Germany, said Germany had benefited from its diverse pool of thousands of midsize manufacturers. “We are not totally dependent on the well-being of 10 or 15 companies,” he said by telephone.

Software AG has even been hiring people at its offices in Spain and Italy, albeit in small numbers, Mr. Streibich said. But the company, which had revenue last year of about 1 billion euros, or $1.3 billion, is gaining sales in those countries at the expense of rivals — not because the overall market is growing, he said.

“We don’t ride a growth wave of G.D.P.,” he said. “It is about taking market share from the competition.”

Data from French purchasing managers pointed to a contraction, with the index at 47.9 in August after 49.1 in July. That suggests that France’s second-quarter growth spurt of 0.5 percent, or about 2.0 percent at an annualized rate, might be a one-time event.

In most European countries, “There’s increasing confidence,” said Feike Sijbesma, chief executive and chairman of DSM, a Dutch specialty chemical company. “That’s good because it could help increase demand.”

DSM reported on Aug. 6 that sales rose 9 percent in the second quarter from a year earlier, to 2.5 billion euros, as profit before interest, taxes, depreciation and amortization rose 19 percent, to 345 million euros.

Mr. Sijbesma said that DSM’s performance was more reflective of its innovations, some of which helped its customers to save money, than of any rebound in Europe. “I’d be very cautious,” he added. “I don’t want to spoil the party, but I feel that in our business we’re doing much better in the rest of the world than in Europe.”